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Wednesday, May 27, 2020

‘Cash desperate’ discoms to get Rs 90K crore infusion: PFC, REC to manage amount

As per a presentation by the FM, discoms currently owe approximately Rs 94,000 crore to power gencos and transcos.

By: ENS Economic Bureau | New Delhi | Published: May 14, 2020 3:32:53 am
nirmala sitharaman economic package, nirmala sitharaman economic package announcement, power demand, power demand coronavirus, coronavirus lockdown, nirmala sitharaman, nirmala sitharaman press conference Discoms have not been able to extract money from customers for providing electricity, which has left them unable to pay their dues to gencos and transcos. (File Photo)

In a move to bail out “cash desperate” electricity distribution companies (discoms) that have been struggling with repayment of dues to power generating (gencos) and transmission companies (transcos), the government Wednesday announced a Rs 90,000 crore one-time “emergency liquid injection” to clear these dues. This government expects central public sector gencos to pass on the benefits of this move to the population by giving a rebate to discoms to pass on to their customers upon receipt of dues.

Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will provide the amount owed to discoms by their customers so that this money can then be used to pay off their dues to the entities providing them with the power, said Finance Minister Nirmala Sitharaman. The funds will be infused once states give PFC and REC guarantees to ensure repayment of the amount in the event that the discom is unable to pay back the corporations.

At the same time, some experts have said that the move, while beneficial in the short term, may not act as more than a quick-fix. If several systemic issues are not resolved, discoms may be back in a position where they are unable to pay gencos and transcos again going forward, as per them.

As per a presentation by the FM, discoms currently owe approximately Rs 94,000 crore to power gencos and transcos.

“Discoms today are facing unprecedented cash flow problems. They desperately need help…all the state discoms are in serious crisis,” said Sitharaman.

Discoms have not been able to extract money from customers for providing electricity, which has left them unable to pay their dues to gencos and transcos.

“We want the benefit (of the infusion) to be passed on to the customer. We are, in fact, telling the Central Public Sector generation companies that they shall give rebates to those discoms which have passed these benefits to the final customer,” she added.

According to ReNew Power CMD Sumant Sinha, this may also be an opportune time for the government to convince states to expedite distribution sector reforms, “so that distribution companies don’t need a bailout next time and are able to become financially viable entities.”

According to analysts, the move may help discoms with short term liquidity issues, but it also raises several questions.

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